Kansai Nerolac Paints Ltd: Outperformer BSE: KANSANERO.BO
Kansai Nerolac Paints has been at the forefront of paint manufacturing for more than 89 years pioneering a wide spectrum of quality paints. Kansai Nerolac is the second largest paint company in India and is the leader in Industrial segment, having a turnover of over Rs 1972 crores. The company has five strategically located manufacturing units all over India and a strong dealer network across the country.
The company manufactures a diversified range of products ranging from decorative paints coatings for homes, offices, hospitals and hotels to sophisticated industrial coatings for most of the industries.
During the quarter the company has commissioned its new facility at Hosur.
Further Board has announced an additional outlay of Rs 230 crores towards expansion of the Hosur facility. With this the total amount sanctioned by the Board for expansion is Rs. 409 crores.
Investors need to note the following:
1. Cash Earnings of Kansai Nerolac for FY10 were to the tune of Rs 200 crore. Thus first phase of Hosur Expansion could be funded internally.
2. Inspite of all kinds of inflationary pressures; the management is further doubling this investment to Rs 409 crore at the Hosur facility, thereby committing cash earnings of FY11 also towards expansion.
3. As a sign of strong confidence in the India growth story, Kansai Nerolac raised dividend pay-out to Rs 15 per share in FY10, and declared a Bonus Issue of 1:1.
4. The last date for submission of response to the Postal Ballot approving the Bonus issue ends on June 11, 2010.
5. 70 per cent of the Equity of Kansai Nerolac is owned by the Japanese parent Kansai, and another 16 per cent is held by Insurers NIA, Oriental Insurance, Bajaj Allianz and Aberdeen Asset Managers.
6. With concenterated ownership passing the Bonus resolution is a formality, and the Record Date for Bonus should be coming through over the next 10 days.
7. A Rs 409 cr investment in New Facilities will take care of double digit production growth for the next 3-4 years.
8. Such a large investment in a single facility, shows Kansai Japan's resolve to commit large funds into it's India operations.
Outlook of Indian Paint Industry:
The size of domestic paint industry is estimated at Rs 21,000 crores as of Mar 2010. The good growth in infrastructure, core sector as well as automobile and real estate is likely to have a positive effect on the overall demand of paint for the industry.
Financials
Kansai Nerolac Paints Limited, one of the leading Paint companies in India, today at the Board meeting announced its audited results for the financial year 2009-10.
For FY 09-10, the company declared Net Sales of Rs. 1706.38 crores, marking a growth of 24.1 % over 08-09. The Net Profit of the company increased by 67.9 % over last year and stood at Rs. 165.50 crores. The Board has also proposed a Bonus for the shareholders at the ratio of 1:1 and a dividend of 150 %.
Highlights of the company's financial performance:
For the fourth quarter ended March 31, 2010:
• Net Sales grew from Rs. 313.55 crores to Rs. 423.77 crores an increase of 35.2 % • PAT increased from Rs. 20.08 crores to Rs. 33.92 crores an increase of 68.9 %.
For the Year ended March 31, 2010:
• Net Sales grew from Rs. 1374.52 crores to Rs. 1706.38 crores an increase of 24.1% • PAT grew from Rs. 98.59 crores to Rs. 165.50 crores an increase of 67.9 %
Commenting on the announcement, Mr. H. M. Bharuka, Managing Director, Kansai Nerolac Paints Ltd said, "The good overall growth witnessed by the economy during the last financial year has helped KNPL achieve good growth for the quarter and the year as a whole.
Both Decorative and Industrial business have done well. Decorative Paints have witnessed a good demand thanks to favorable government policies and budget. The growth in the automotive and consumer durables has helped fuel good demand for Industrial paints. We have also seen a good growth in infrastructure as well.
Overall, however the picture of paint demand remains very positive over the long term.
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
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